(News Bulletin 247) – The Swiss authorities have come to the aid of the Swiss bank. For the future, several observers believe that the company will have to continue its restructuring, or even move closer to another establishment.

The storm has calmed down for now. In the crosshairs of the markets on Wednesday, Credit Suisse halted its fall on the stock market thanks to the intervention of the Swiss authorities, in particular the Swiss National Bank (SNB), which agreed to provide it with liquidity. The establishment announced Thursday that it was activating an option allowing it to borrow up to 50 billion Swiss francs, or just over 50.7 billion euros, from the SNB.

However, this emergency intervention by the Swiss authorities will have to be followed by actions by Credit Suisse. “The road to a real improvement in the Credit Suisse panorama will surely be long, but the action of the Swiss authorities today makes it possible to avoid an accident with harmful consequences”, underlines Sebastian Paris Horvitz of La Banque Postale Asset Management. Morningstar, believes that the support of the SNB buys time for the company to restructure.

What scenarios for the future of the Swiss bank? Here are some possibilities.

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Become the new Deutsche Bank

Credit Suisse could benefit from the time granted by the support of the SNB to continue, or even accelerate, its restructuring plan.

“The SNB’s liquidity should help stabilize Credit Suisse’s deposits. In this case, the institution would have time to continue its restructuring by developing its retail banking in Switzerland, wealth management in several countries, in particular in Asia where the group has recorded great successes, while reducing the size of its corporate and investment banking activities”, explains David Benamou, chief investment officer at Axiom Ai.

“In fact, Credit Suisse would follow a model similar to that of Deutsche Bank from 2019, which has undergone a major restructuring. It took time, but confidence has returned to the German establishment,” he explains.

However, this plan will require patience as these transformations always take time. “The stock price is likely to remain low during this restructuring phase, but the bank would continue its plan to become profitable again, which should take at least 24 months”, considers David Benamou.

Quoted by Reuters, the bank JPMorgan believes on the other hand that the “status quo” is not tenable.

Make a call to the market

Credit Suisse has a common equity tier one solvency ratio – an indicator of capital strength – of 14.1%.

But despite this high indicator, Morningstar considers that the group “would need additional capital to finance the restructuring costs linked to the closure of unprofitable activities”.

The financial intermediary notes, however, that the refusal of the Saudi National Bank, which owns a little less than 10% of the capital, to return to the pot, “makes it difficult to issue securities”.

“I do not believe it for a single second today because the capital increase that Credit Suisse carried out at the end of 2022 is amply sufficient to finance the restructuring of the establishment”, judge for his part David Benamou.

Make assignments

Morningstar believes that Credit Suisse could sell “higher quality units” or list on the stock exchange “a minority stake in profitable Swiss banking activities”.

This hypothesis is also mentioned by Reuters. The agency quotes a banker who explains that the Swiss establishment is better valued at the cutting and that there are discussions on potential transactions in this direction.

Being sold to a competitor?

This idea seems to be gaining ground lately. “Credit Suisse has 50 billion in regulatory capital but is now worth between 6 billion and 8 billion euros on the stock market, depending on the day, it’s barely a year of profits from UBS or BNP Paribas and we’re not even talking American banks”, underlines David Benamou.

“The group could interest many players, especially those looking for a good wealth management franchise. However, potential buyers may not want to buy the corporate and investment bank, which represents significant restructuring costs and has a business plan that is not yet completely clear to the analyst community,” he said.

Quoted by Quartz, JPMorgan pointed out in a note that UBS appears to be the most natural “savior” of Credit Suisse. According to her, the other Swiss bank could close the trading activities, keep the wealth management of Credit Suisse and list those of retail banking in Switzerland, so as to avoid the complaints of the competition authorities on this activity.

However, according to people familiar with the matter, quoted by Bloomberg, both UBS and Credit Suisse would be opposed to a forced merger.

Bankruptcy is unlikely

All observers agree that a “resolution” is unlikely given the damage it would cause to the Swiss economy and the international financial system. “There is always this scenario of bank resolution, that is to say bankruptcy, but it is simply fanciful because it would concern an establishment without capital and liquidity, and we are light years away from that with Credit Suisse. “, abounds David Benamou.

Asked by News Bulletin 247, a spokesperson for Credit Suisse did not comment on the different scenarios cited by the experts.